Stakeholder Banks

Key findings
  • Stakeholder banks put greater focus on the needs of customers: better service, more competitive products, longer-term lending
  • They have a positive impact on local economic development by supporting small and medium businesses

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March 28, 2013 // Written by:

Tony Greenham, Head of Finance and Business
Lydia Prieg, Researcher, Financial Reform

We surveyed data from 65 countries to identify successful alternatives to commercial banks, which we define as banks that have the main objective of maximising shareholder value. Four distinct forms were identified: cooperative banks, credit unions, community development finance institutions (CDFIs), and public interest savings banks. Their common characteristic is the goal of creating value for stakeholders, not just shareholders. Several trends emerge across all four types of bank:

Criticisms that stakeholder banks are inefficient and distort competition are found to be unconvincing. However, lack of access to capital is a constraint on growth, and there are lessons to be learned from those institutions that failed during the financial crisis.

We conclude that certain factors are critical to the success of stakeholder banks:

We recommend that banking policy explicitly acknowledges the benefits of banking diversity – including to global financial stability – and seeks to nurture a vibrant stakeholder banking sector.

Issues

Banking & Finance

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